Peter Crow
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What are the keys to effective leadership?

10/7/2020

 
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As a devotee of life-long learning and a student of history, I keep an eye out for ideas and examples to share with boards and directors—in the hope that some might prove useful to help boards lead more effectively, from the boardroom. Amongst the news feeds and magazines that cross my desk (actually, computer screen), this journal often contains thought provoking articles. Recently, I was looking through some older issues and stumbled across this item, which explores effective leadership. The author offers seven 'keys' to effective leadership, as follows (I've taken the liberty of attaching a comment to each—a consideration for boards and directors):
  • Provide the why: Why does your firm exist? People get behind causes, not things. Simon Sinek makes the point better than anyone else I know. Purpose first, then strategy. 
  • Embrace variety and listen: Cookie cutter approaches to strategy rarely work. When your board and management team goes off-site to form strategy (yes, together), are customers, suppliers and industry experts invited into the tent, to explain what's important to them and their success? In my experience both as a director and a facilitator, the value these people provide is priceless.
  • Influence: Boards do not operate companies directly, that role is delegated to the chief executive. The only way boards can get things done is through the actions of others (who need to agree to act). Effective working relationships are crucial, and everything needs to be tied back to the agreed purpose and strategy of the enterprise.
  • Read, think, write: How busy are you as a director? Companies and the markets they operate in are complex and fluid. If directors are to contribute effectively and boards are to make good decisions, they need understand the business of the business. Getting up to speed and staying there takes time. 
  • Lead education and change: It all starts at the top. Bob Garratt made this point deftly about twenty-five years ago. His book should be on every director's reading list. Another suggestion: directors need to commit to continuing professional development (ideally, through an accredited provider or local directors' institute ). 
  • Understand failure and take risk: I re-read this article when preparing to facilitate purpose and strategy development workshops, or to complete a board effectiveness assessment: "True strategy is about placing bets and making hard choices. The objective is not to eliminate risk but to increase the odds of success." Enough said.
  • Understand surprise and chaos: As much as directors and chief executives like to think they can, they cannot predict the future. If Covid-19 is to teach us anything, it is that. Companies that have endured over generations get this. Learn from them.
Comments?

Governing through a crisis: a conversation

12/5/2020

 
Last week, Scott Arrol, CEO of ​NZHIT (New Zealand's peak body for those involved the digital health sector), got in touch to ask a few questions about the contribution of boards during times of crisis—a topical subject! The primary challenge for boards in such times is working out how to respond. The playbook that may have served well in the past is, probably, of little use now that the operating context has been flipped on its head. Despite this, the board remains responsible for business performance, so respond it must.
During our conversation (which was recorded, see below), we touched on the following points:
  • The board's role during and following a crisis
  • Frequency and conduct of board meetings and management interaction
  • Balancing the tension between the here-and-now, and the longer-term
  • Tips for more effective decision-making
  • The 'touchstone' value of a clear purpose and coherent strategy
  • Eliciting multiple perspectives; reading widely; asking probing questions
  • Making a difference (adding value, in practical terms)
  • Governing in the healthcare sector, specifically
If you'd like to explore any of these or related points further, please get in touch. 
​

Governing well, in the face of a crisis

19/3/2020

 
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Information (and mis-information) about the spread of COVID-19 around the world is clogging our airwaves, inboxes and social media feeds as quickly as the virus itself is spreading. But amongst it all, there are some things we can hold as self-evident. Many people are suffering, some are dying. New phrases are entering the lexicon, such as, social distancing (should be physical distancing, I think) and self isolation. Governments are responding with a variety of controls to limit movement. Borders have been closed, and lockdowns are being imposed in some areas. Airlines have reduced capacity, grounding fleets. Many businesses, especially SMEs, are in turmoil. People are on edge—lives have been put on hold.
While COVID-19 has spooked many people, not to mention the stock markets and wider economy, life must go on—and it will, albeit with some adjustments, of course.
The challenge for those who direct the affairs of companies—boards—is one of governing well in the face of what is, patently, a very different environment from that which existed even two weeks ago.
Businesses face continuity and safety risks every day. Routinely, staff and managers spot, assess, prioritise and respond to operational risks every day; that is their job. But when risks have strategic implications (i.e., an occurrence is likely to have a major effect on strategy execution, future business success or even company viability), the board must become involved. COVID-19 is one such risk. The board needs to understand the potential short- and longer-term impact (using information from credible sources and tools such as scenario planning, for example), consider various options and make informed decisions.
Some practical questions that the board may wish to consider include:
  • Has management made changes to the work environment (including remote working options, physical barriers, closing sites, etc.) to ensure the safety of all staff, customers, suppliers and any visitors?
  • What additional financial resources need to be released to support continued business operations, and how will they be provided?
  • What is the likely impact on short- and longer-term income, and do any adjustments need to be made to reduce operating expenses (including, potentially, suspending or releasing staff) to maintain viability?
  • What capital projects can be deferred to release funds to support working capital demands?
  • ​Should the board itself use on-line meeting or video conferencing tools instead of meeting in person?
  • Should the board meet more frequently, rolling its sleeves up in support of management and for more timely decision-making?
One final point. COVID-19 is no longer a strategic risk. It is upon us. Boards everywhere need to deal with it as well as they can, given the most reliable information available, with the best interests of the company to the fore. That means providing close support to management; more so if big decisions are needed, such as releasing staff or partial closures. However, and most importantly, boards should not panic. Neither should the board react to suggestions being advanced by some that an event such as the COVID-19 outbreak should be seen as a catalyst to redefine corporate governance. Corporate governance remains corporate governance—the means by which the company is directed and controlled. What might be appropriate though is a review, to consider how the board practices corporate governance. But that should wait until the current crisis in in hand. Fix the problem first, then learn from it.

Is corporate governance a framework, or something to be practiced?

11/10/2019

 
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English can be a confusing language. The same word can have different meanings in different contexts (by 'bear', do you mean the animal, taking up arms, or putting up with someone; and is a 'ruler' a measuring instrument or a monarch?). Meaning and usage matters; more so because it is not static. Language evolves, whether by design or in response to an evolutionary development. Some refinements improve our ability to communicate effectively, others to defy logic.
The understanding and usage of the terms 'governance' and 'corporate governance' are topical cases in point. While the term 'governance' is derived from the Greek root kybernetes meaning to steer, to guide, to pilot (typically a ship), a plethora of usages have emerged over time. Today, many different usages have become commonplace. These include the oversight of managers and what they do; the activities of the board; and the framework within which shareholders exert control and boards operate.  It is also used to describe the board itself ("we'll need to get the governance to make that decision"). ​The term has also been applied in an even broader context, the business ecosystem (i.e., system of governance). The most extreme example I have heard is, "Governance can mean almost anything, it is completely idiosyncratic; different for every organisation".
Things are made worse when two related but distinct concepts are conflated. Consider the definition of corporate governance and the practice of corporate governance. The former is relatively stable. Eells (1960) coined the term, to describe the structure and functioning of the corporate polity (the board). Later, Sir Adrian Cadbury (1992) added that 'corporate governance' is "the means by which companies are directed and controlled". The fundamental principle here is that corporate governance is a descriptor—the activity of the board. Compare that with the practice of corporate governance--how a board enacts corporate governance when it is in session. The means by which boards consider information and make decisions can and must be fluid depending on the situation at the time.
The wider context merits a brief comment—the rules under which companies and their boards operate (statutes, codes and regulations), and the consequential impact of the board's decisions. These are necessary, because they define the wider environment; what is allowed and what is not. In recent years, ​I've heard many people include regulations and codes within their understanding of corporate governance. Similarly with the consequential impact of the board's decisions beyond the boardroom. Are either of these corporate governance?
If you'll allow a sporting analogy, it's important to distinguish between the rules of the game, the game as played, and the final score. All are necessary, but only one is the game. To embrace an all-encompassing understanding suggests that corporate governance is ubiquitous, extending across the entirety of the company's operations and the functions of management, leadership and operations—not to mention the wider system of rules of regulations. This, I am convinced, takes us close to the root of the confusion that besets many directors. Every time I'm asked, I invoke Eells and Cadbury. A framework of laws and regulations is necessary, for these define the operating boundaries. But they are not corporate governance. In asserting that corporate governance is the means by which companies are directed and controlled, Cadbury was saying that corporate governance is the descriptor for the work of the board. And work, straightforwardly, is something to be practiced. Let's not lose sight of these distinctions. The continued 'sloppy' use of language serves only one purpose: to obfuscate. 

Hallmarks of 'successful' directors

7/6/2019

 
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In 2014, I observed that aspects of corporate governance and board work had not changed much in 25 years. Having just re-read the book that informed that conclusion (Making it Happen, by John Harvey-Jones), I've been reflecting on the relevance of the author's comments in today's world, especially ruminations on board effectiveness and three defining hallmarks of a successful director:
  • First, directors must feel responsible for the future of the company. When something goes wrong, you should feel a degree of worry and concern and want to contribute to its resolution.
  • Second, directors must be able to influence the general direction of both the board and its decisions. Diversity of thought is beneficial: groupthink (and other variants of #metoo thinking) has no place in a boardroom. You must be able to influence others to change their mind from time-to-time—and be prepared to consider other arguments and change your mind as well.
  • Third, a director's contribution must be constructive. Have you read and understood the board papers? Have you asked questions before the meeting. Are your comments during the meeting helpful or destructive? Do you challenge ideas with honesty, integrity and in good faith? Do you help move the debate forward, building on the ideas of others, or do you reiterate comments of others and foster ill-will?
Are these hallmarks still applicable in today's fast-paced, technically-savvy world?
Some commentators assert that board effectiveness is the result of compliance with corporate governance codes and various structural forms. Others, including me, place a heavier emphasis on the capabilities and behaviours of directors on the basis that the board is a social group: men and women who need to work together. (That is not to say compliance is inappropriate. It is necessary but it is not sufficient.)
​My recent observations and empirical research suggest that Harvey-Jones' hallmarks remain as relevant today as when they were first proposed, three decades ago. But that is just my view. What is your experience? ​

Will board effectiveness improve in 2019?

16/1/2019

 
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With 2018 consigned to history and holiday season break all but over, most business leaders and boards of directors are turning their attention to what the year ahead (and beyond) holds. Even a cursory glance reveals a plethora of issues that may have an impact on business continuity and, potentially, continuance. 
Consider these indicators:
  • ​Rampant economies that have powered much of the global growth over the last decade may be running out of steam. Many Asian 'tiger' economies are growing less rapidly than before, Apple and other tech giants have issued warnings, indicating that a correction may be just around the corner.
  • Populism and nationalism are no longer words heard only in political and academic hallways.
  • The climate is changing.
  • Medical and social developments are impacting the lives of untold millions around the world.
  • Disruptive technologies and business models are fundamentally changing commerce.
  • Weaponising of biological 'forces' to reshape nations, economies and mindsets.
  • March 29, 2019 is shaping as a watershed date for Britons and Europeans in particular, but also others.
  • The US-China trade war and disquiet in the Middle East have the potential to disrupt international trade.
  • The emergence and potential impact of identity politics and various lobby movements (#MeToo and #GilletsJaune are two examples amongst many).
  • In several countries, general and/or local government elections are occupying the minds of many.
And that's just the start.
As is usual at this time of the year, business and governance commentators have stuck their collective necks out, promulgating a variety of predictions given the indicators (as real or imagined as each indicator may be); each behaving as if they possess levels of predictive insight beyond what a reasonably educated person might be able determine by tossing a coin. But do they? They cannot all be correct—in fact, none may be. 
The challenge for boards, of course, is working out how to respond well. 
What is becoming increasingly clear is that boards have become confused by what's going on around them. Increasing numbers have grown quite tired of 'conventional wisdoms' and so-called 'best practices' (plurals intentional). Some have responded by taking defensive positions, and others are boldly trying things without first understanding the contextual relevance.
My response to enquiries from boards is straightforward: open your eyes to the possibilities, think and act strategically, but don't be impetuous. Check the current context, because things change, often in unexpected ways. Helping boards respond well typically involves sharing insights from research and practice; facilitating discussions; and providing contextually-relevant and evidence-based guidance. If you want to discuss options to respond well to a changing world around you, or lift the effectiveness of your board, please get in touch. 

Value creation: A commonly used term, but what does it mean?

11/12/2018

 
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Much has been written about the notion of value creation since the phrase became 'hot' in business circles several years ago. Today, one does not have to listen for long to hear questions such as "Does XYZ add value?' or "What's our value proposition?"The term is dropped into sentences hither and thither, flowing from the tongue freely, as if it were an old friend. This implies that 'value creation' is front-of-mind; something that is not only topical but also to be striven for. 
But what is 'value creation', and how is value created? Here's one view:
Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services, while creating value for shareholders, in the form of increases in stock price, insures the future availability of investment capital to fund operations. From a financial perspective, value is said to be created when a business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital). But some analysts insist on a broader definition of "value creation" that can be considered separate from traditional financial measures. "Traditional methods of assessing organizational performance are no longer adequate in today's economy," according to ValueBasedManagement.net. "Stock price is less and less determined by earnings or asset base. Value creation in today's companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand."
This description, from Reference for Business, reveals that 'value' can mean different things to different people. As with many concepts within the social sciences and liberal arts (of which management and governance are expressions), context is crucial. Clarity of language is needed if leaders are to be effective and businesses are to prosper. Listeners and readers must be able to comprehend messages readily. The following questions provide a useful starting point for such an enquiry:
  • Who is the recipient of the intended value?
  • What is valuable to them, and why?
  • Can this value be created cost-effectively?
  • How will 'success' be measured?
Rather than make assumptions or assertions (think how often have you heard people claim a 'unique value proposition'), put these questions to the beneficiaries (because, rightly understood, the 'value' of anything is determined by the recipient not the creator). 
Start your enquiry at the 'top' of a company. Boards should sit with shareholders and ask (or propose, if the shareholder is unclear) what 'value' looks like to them. This is the 'core purpose' question. Responses might include increased share price; a long-term market position or business model; increased market share; a social priority; or some combination of these, or even something completely different. Senior managers and staff should meet with customers (or prospective customers) and ask the same question. Ask staff themselves as well: the motivations of employees are likely to be different from those of shareholders and customers. 'Great solutions' that 'add value' to are highly unlikely to hold any sway at all if the intended beneficiary does not recognise, or is not interested in, the 'value' that is supposedly being offered. As with strategy, boards need to take the high ground, by ensuring that value created for one recipient does not erode value elsewhere. Boards need to work with management and together become crystal clear about value in a holistic sense: what it is, who the recipient is, and how it is created. ​
Once the value matrix (what, to whom, how and why) is understood and agreed, the answers need to be communicated in a clear and concise manner, so that effort and expectations can be aligned accordingly.
​Finally, a note to boards: You have an ongoing responsibility to ensure that purpose, strategy and managerial and operational activity are not only aligned, but also the desired value (outcome, strategic goal) is actually being achieved and that it is recognised by the intended recipients. The importance of ask probing questions cannot be overstated.
An earlier version of this article first appeared in 2015.

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Peter Crow PhD CMInstD

Company director | Board advisor
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